First quarter figures ABN AMRO still feel the effect of a difficult 2020

First quarter figures ABN AMRO still feel the effect of a difficult 2020

01 June 2021Reading time: 3 minutes

On May 12, ABN AMRO published its first quarter results of 2021. The operating income rose 3 percent on a quarterly basis in the past quarter to EUR 1.85 billion. This result was 4 percent lower than in the first quarter of 2020. Interest income improved by a modest 1 percent on a quarterly basis to EUR 1.36 billion, while interest income declined 11 percent on an annual basis. The interest margin fell on an annual basis from 1.55 to 1.34 percent. The bank also managed to generate EUR 200 million in mortgages in the past quarter. Within the Dutch mortgage market, ABN AMRO now has a market share of 17 percent. The core capital ratio improved on a quarterly basis by 0.3 percent to 15.3 percent, based on the future Basel-4 capital rules.

The net loss of EUR 54 million for the first quarter is a significant improvement on the net loss of EUR 395 million in the same period last year. In addition, the bank reached a settlement with the Dutch government in the first quarter for insufficient compliance with anti-money laundering practices. The government fine was EUR 480 million. Without this fine, the bank would have made a profit in the past quarter.

Positive outlook

Due to the corona crisis, ABN AMRO had to reserve approximately EUR 1.1 billion for bad loans last year. This year, the bank is expected to have to set aside EUR 77 million less.

Firstly, ABN AMRO expects the economy to recover further this year. Secondly, the new Basel-4 rules are less strict than expected, which stipulate the mandatory minimum buffer that European banks must maintain for uncollectible loans. In addition, the bank expects risk costs to be below the average of 25 to 30 basis points in the loan book, while the bank may benefit from rising interest rates later this year. At the same time, rising inflation can throw a spanner in the works of ABN AMRO when this hinders economic recovery.

Considering all the favourable developments, there is a good chance that ABN AMRO will be able to pay dividends again in the short term. The European Central Bank (ECB) imposed a ban on dividend pay-outs for all European banks. When this ban is reversed, ABN AMRO plans to at least pay out the dividend for the second half of 2019. In addition, the bank also wants to start a share repurchase program as soon as the ECB gives permission for this.

Stock price development

For the time being, investors seem to have a wait-and-see attitude towards ABN AMRO and the share price remains around EUR 10.50. At the time of writing, the share price (24.05.2021) is EUR 10.74.

The future price of the stock is subject to several political, industrial and sector specific as well as economic factors. Investors should consider these risks when making their investment decisions. Developments can be different at any time than investors anticipated on, which could result in capital losses.

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12/06/2021 19:14:43